Wealth and asset management transformation: a technology balancing act

Multi-service firms looking to consolidate their operations and technology usage need to solve for the unique needs of both businesses and strike the right balance

by | July 11, 2022 | Meradia

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A growing number of multi-service firms, those offering both asset management and wealth management services, are now recognising they must re-evaluate their operations and technology usage to drive economies of scale and prepare for the future. These businesses are realising that keeping two separate technology stacks is creating inefficiencies, running up unnecessary costs and failing to generate new opportunities at a time when their companies are experiencing rapid growth. They need to adapt quickly to compete effectively.

At Meradia, a global leader in consulting for investment operations and technology, senior manager and wealth practice lead Tina Madel, CFA, identifies common challenges firms face when embarking on major transformation projects.

“The most common driver for change is the acquisition of a new business to expand services, which sees the company enter either wealth management or asset management for the first time,” she says. “These acquisitions require firms to support new processes and often integrate with new software solutions.”

Unique business requirements

Despite a growing movement towards transformation projects geared at achieving greater consolidation in front to middle and back-office operations, complete consolidation can prove impractical due to different requirements.

“On the wealth management side, it is important to build deeper client relationships and be able to guide individuals through different and, sometimes, difficult situations,” says Madel. “The client portal for wealth clients needs to reinforce the advisor-client relationship more so than for an asset manager relationship.”

“The calculations and reporting needs vary between businesses. For example, the wealth management service team is required to understand the end-client’s tax status and margin tax rates to invest tax efficiently across portfolios. Furthermore, reporting needs to support this objective with tax-adjusted returns and detailed information: sources of income by taxability type, cumulative realized gains categorized by short-term or long-term, as well as tax lot details for held positions,” says Madel.

“On the other hand, asset managers provide after-tax reporting following fund reporting standards for pre- and post-liquidation, which require a different set of inputs and calculations. In general, the asset management needs are more focused around the portfolio manager and the investment strategy pursued. They require analysis relative to benchmarks and peer universes as well as tools that view the performance impact of their decisions.”

A hybrid of these two business types is the family office. They tend to have complex investments, require data aggregation, support alternative investments, and report on managed and non-managed investments. Family offices typically employ a team of people with wider skills sets, ranging from relationship management to tax planning and wealth management, each of which requires technology to support the breadth of services.

How to approach consolidation

Nevertheless, there are always overlapping functions across asset management and wealth management, which can be consolidated to realize cost savings from economies of scale.

One of the best ways to achieve a unified solution is to look at both businesses’ core needs and deliver on those, Madel says. “Areas like accounting, performance measurement and data management are typically shared services across the enterprise.  They can be consolidated while still delivering required services to multiple business segments,” Madel says.

“Individual business requirements that are on the fringe of these common requirements can be achieved through plug-in components that optimise the solution set according to needs,” she explains. “When it comes to the level of analytics required for each, that’s where we see major differences that require a decentralized approach.”

For multi-service companies re-evaluating their operations and technology, Meradia offers a range of services from developing a roadmap for change, solution design and vendor selection to project management and system conversion, implementation and full-scale business transformation.

Madel stresses Meradia takes a “stepped-back view” and looks at both the similarities and differences between the two businesses. “[We consider] a wider perspective of where they are today in terms of their operations and technology, and assess both the opportunities which exist for consolidation, as well as the ‘pain points’,” she says.

Added to this, Meradia offers advice on whether to build or buy a solution which can be used by both asset and wealth management teams.

In some instances, a pure ‘build’ approach may result in a solution which meets one business unit’s needs more than the other. Selecting an external vendor could also prove a time-consuming and laborious process given the thousands of vendors offering different solutions.

“A company’s approach to vendor selection must be visionary to meet its future requirements,” says Madel.

“Taking account of the cultural differences that exist between the two different businesses can also be an issue when selecting a third-party vendor,” she concludes. “The people selecting that vendor need to be unified and consolidated in both their approach and their requirements from the very start of this process.”



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